Pharmaceuticals: Pricing Pressures Become New Normal

Pharmaceutical pricing pressures will continue

Pharmaceutical manufacturers will continue to face public sector regulatory pricing pressures, as governments aim to contain rising budget deficits. In addition, companies’ profit margins are expected to be negatively affected by expected patent losses. Finally, generic drug consumption and manufacturing is expected to intensify putting further pressure on drug prices.

Companies are expected to continue increasing spending on advertising

As a direct consequence of intensifying pricing pressures, companies witnessed shrinking profit margins. As a result, pharmaceutical makers ramped up their advertising budgets to shield themselves from potential revenue losses. Some, however, maintained substantial investments in R&D hoping to develop the next blockbuster drug.

M&As are set to continue

Although M&As somewhat slowed down in 2016, deal-making is expected to remain strong in the near future. This is partly due to the players’ strategic pursuit to externalise R&D. In addition, companies are increasingly willing to buy out innovation at an earlier stage of development.

Ageing populations ensure ongoing demand growth

Ageing populations in developed countries are expected to ensure continuous growth in demand for higher cost pharmaceuticals. As a result, biologics is set to be among the most lucrative drug sectors, with the greatest demand for oncology, diabetes, and rheumatoid arthritis treatments.

Technology to offer cost-saving opportunities

Pharmaceutical manufacturers can gain from Industry 4 solutions, as new technologies will provide significant production savings.